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The Wall Street Journal (13/May/1998) - Even in Hollywood, Nostalgia Will Get You Only So Far



Even in Hollywood, Nostalgia Will Get You Only So Far

Sequels play well in Hollywood. This summer brings "Lethal Weapon 4." A new "Star Wars" series is in the works. So why not a Chasen's II?

Dave Chasen's family certainly thought it was a good idea. After nearly 60 years in business, the restaurant that bore his name was about to close. Madonna, John Travolta and Jodie Foster were among those who made pilgrimages to mourn the passing of the legendary joint where stars like Jimmy Stewart and Frank Sinatra dined on such classics as Hobo Steak, cheese toast and banana shortcake.

Buoyed by the support, the family decided not to close up shop for good. Instead, they made a deal with a businessman named Grady Sanders. With $1 million raised from high-profile investors -- including millionaire businessman Michael Huffington, several big L.A. lawyers and Alfred Hitchcock's daughter -- Mr. Sanders relaunched Chasen's in April 1997 to much fanfare.

Loyal patrons packed into the tapestry and leather booths and around a family-size table in Maude's Dining Room under a portrait of Mr. Chasen's wife, Maude. Waiters in tuxedos served Chasen's signature dishes on Limoges china. Mr. Sanders had gone so far as to refurbish a cherrywood bar featured in Billy Wilder's film, "Irma La Douce."

But even in Hollywood, nostalgia isn't what it used to be. The celebrities who showed up for Chasen's final act generally haven't been in evidence at its comeback. Most recently, neither has the food. In January, the restaurant's longtime meat purveyor, Superior Meat Co., stopped a delivery until Chasen's paid its back bills, and relations have since been terminated. Hobo Steak -- a slab of sirloin cooked in a half cube of butter and encrusted in salt -- was dropped from the menu soon after. Diners who have ordered Sole Hitchcock, a breaded filet of sole in a tomato sauce, have on several occasions been told that the restaurant is out of fish. Last month, when Chasen's ran out of beluga caviar, its floor captain had to bolt down the back alley to its competitor, Wolfgang Puck's Spago, to borrow a jar for the evening. Two veteran restaurant managers have left since the reopening; two chefs have come and gone.

All of this would have had founder Dave Chasen simmering over his hot stove. Mr. Chasen, who died in 1973, opened the restaurant in 1936 on the corner of Doheny Drive and Beverly Boulevard with one main course: chili. The dish was so popular that Elizabeth Taylor even sent for a batch while filming "Cleopatra" in Rome. Over the years, Mr. Chasen added new entrees such as Deviled Beef Bones, a delicacy of rib roast coated in mustard, bread crumbs and Parmesan.

This is the piece of history that investors bought into, each for a minimum of $17,000 apiece. As part of the limited partnership arrangement, Mr. Sanders provided the bulk of the financing through an entity he chaired -- an offshore investment company on Nive, an island in the South Pacific. He promised to bring back the formality he thought L.A. restaurants lacked and made plans to open a private cigar club called the Jockey Club. Gossip columnist Liz Smith gushed about the "Texas millionaire" who was the "brainchild" behind the revival.

Amid the hype, nobody apparently checked out Mr. Sanders very thoroughly. It turns out that he owes the Internal Revenue Service more than $1 million, according to liens filed in the Harris County Clerk's office in Houston. He also hasn't paid $1 million in fines to the Securities and Exchange Commission, which found that Mr. Sanders had misled investors who bought penny stock in a shell company created by his ex-girlfriend -- and, an administrative judge found, "controlled" by Mr. Sanders -- to develop a Colorado casino that was never built. Mr. Sanders didn't return phone calls, but in a letter responding to written questions, he says his lawyers are in discussions with the SEC. During his tenure at Chasen's, Mr. Sanders has used his corporate expense account and the restaurant's policy on complimentary food and drink -- giving away $29 glasses of Dom Perignon, and bottles at $135 a pop -- rather liberally at the same time that the restaurant has had trouble paying its suppliers. Poring over stacks of documents, former financial officer Jason Fox says, "It was getting totally outrageous. There was no money to pay the bills and Grady was spending more and more money on himself."

Mr. Fox, who now runs a charter-jet service, resigned last summer. He left with copies of financial documents, among them copies of checks written on the restaurant's account covering Mr. Sanders's $9,000-a-month lease on a Beverly Hills estate and American Express charges for at least one trip to Mexico's Baja for himself and a girlfriend. Mr. Sanders, in his written response to questions, says: "It is true that we have been running late on some of our bills but they are getting paid." Suppliers have been paid in cash, he says, "to get the best prices possible."

He says he charged the lease on his home to the restaurant because it was also used as an office. As for the free Dom Perignon, he says, it comes with membership to the Jockey Club. He says he reimbursed the restaurant for his Baja trip, and also paid back money for restaurant checks issued to a horse farm. They were "issued in error," he says.

Mr. Sanders says Chasen's has been in the black for the past four months and has no problems keeping a sufficient inventory of food. But, he says "we frequently run out of fresh fish and caviar."

Investors in the limited partnership quickly brought in an auditor last summer after receiving detailed reports of Mr. Sanders's spending from Mr. Fox. Some investors had gotten involved because they wanted a piece of a glitzy Hollywood scene; others invested out of loyalty to the Chasen family. No one has so far pulled out. But it is a sensitive subject.

"My personal business is not the business of The Wall Street Journal," says Walter Lack, a trial attorney who plowed at least $70,000 into the restaurant, records show.

Investors are cautious. When Mr. Sanders asked for more cash from his partners, several declined, including Mr. Huffington and Mr. Hitchcock's daughter, Patricia O'Connell. Mr. Huffington, who spent $30 million on his unsuccessful bid for the U.S. Senate in 1994, dismissed his $25,000 investment as the smallest in his portfolio, but says he wouldn't put up any more cash. He says he doesn't follow the books there. "We have no idea until either profits start rolling in or it goes the other way," he says.

Another investor, Bradley O'Leary, a political consultant in Washington, D.C., comes to the restaurant's defense. He says Chasen's "is not showing the profit that investors had hoped" because of delays in the opening of the cigar club and legal bills to obtain smoking privileges for the club. Mr. O'Leary adds that "Mr. Sanders's financial position in no way affects the restaurant."

And Mr. Chasen's family is soldiering on. They had already sold the property when Mr. Sanders came into the picture and acquired the license to use the Chasen name at a new location. Scott McKay, the grandson of Dave and Maude Chasen, was hired as a manager and given a small share in the restaurant. Mr. McKay, who is responsible for many of Chasen's day-to-day operations, says he knows very little about his business partner's past and doesn't want to know. He concedes that he doesn't look at the books. "My family is very well-protected," he says of their relationship with Mr. Sanders. "I want this restaurant to be here for another 60 years just like the old Chasen's," he says.

Sentiment is strong for others as well. Superior Meat had supplied the steak in the Hobo Steak and the beef in the chili since the 1950s, and the company's president, Steven Grayson, says he regrets the parting of ways -- and that he was eventually paid the $25,000 Chasen's owed in back bills. That said, Mr. Grayson stresses, "I want to make sure people know it's no longer my product there."